Dialogue: Poverty statistics ignore social, economic mobility

REUBEN CHAPPLE* says it makes no sense to claim that the pay rates of different occupations show society has become unfair.

A survey of pay rates in various occupations has brought the predictable claim from various commentators that the rich are getting richer and the poor are falling behind.

We are told that this is evidence of how unfair our society has become.

The first thing we need to consider in assessing the merits of such a claim is that we are talking about abstract categories such as the top or bottom 10 or 20 per cent of families or households rather than about real people. As long as all incomes are not identical, such disparities will exist.

But these abstract categories do not always contain the same people.

Household income distribution statistics can be compared to a snapshot in time. They do not show whether the people in those brackets are stuck there permanently or are just passing through. It is grossly misleading to suggest that "the poor" are an enduring class of people when most households in the bottom 20 per cent will rise out of that bracket within a decade.

More of them end up in the top 20 per cent in a decade than remain at the bottom.

According to studies, only 3 per cent of all households will remain permanently in the bottom 20 per cent. This is nothing like the huge numbers "living in poverty" that we continually hear about from academics, media commentators and politicians.

Nor do households contain the same number of income earners, either at a given time or over time. It doesn't take a rocket scientist to work out that households in higher-income brackets are likely to have more people working.

This is a major reason for differences in household incomes. People earn money and more people tend to earn more money.

Household size is not the only explanation for income differentials. People starting out in their careers rarely make as much money as they will after they have built up work experience, contacts, client bases and professional reputations.

Those who have worked for many years are also likely to have accumulated assets in the form of bank accounts, share investments, pension funds and equity in their homes.

It is, therefore, to be expected that 60-year-olds have higher incomes and more wealth than 30-year-olds. The same was true 30 years ago when today's 60-year-olds were themselves 30.

These are not different classes of people, but the same people at different stages of their lives.

Most officially "poor" New Zealanders today own things that middle-class New Zealanders in times gone by could only dream about - colour televisions, video recorders, stereos, microwave ovens, washing machines, clothes dryers and cars.

The rising standard of living of the average New Zealander owes nothing to political rhetoric, mass rallies or poses of moral indignation. No socialist government has ever done as much for the poor as capitalism.

Even when it comes to the redistribution of wealth that is at the heart of socialist ideology, the market does it better. A glance at the annual National Business Review Rich List shows that most millionaires did not inherit their wealth, but created it themselves.

The political left remains unconcerned about how wealth is created. As far as it is concerned, wealth exists somehow and the only question is how to redistribute it.

Major changes in the distribution of household income happen regularly and without fanfare in the market economy, but are ignored by those who talk only about income brackets and ignore the movement of real people in and out of those brackets.

There was a time when poverty referred to a lack of food, shelter or clothing. Today, it refers to a household income arbitrarily selected to keep "poverty" alive, to keep "the poor" from disappearing and leaving big-government advocates without one of their key arguments for more taxation and spending.

No one can really understand the political left without understanding that they are about making themselves feel superior, however much they may talk piously about what they will do to help the "disadvantaged."

This is simply a means to the end of attaining the political power with which to express their self-infatuation by imposing their vision of the world on others.

Their talk of "fairness" is one of the most dangerous concepts in politics. Since no two people are likely to agree on what is "fair," this means that there must be some third party - the Government - with the means to impose its will.

The road to tyranny and despotism is paved with "fairness."

* Reuben Chapple, an Act Party member, is a Whangarei property manager.